What the New Tax Bill Means for You

The enactment of the Tax Cuts and Jobs Act represents “the most sweeping overhaul of the U.S. tax code in more than 30 years.”1

For millions of Americans and businesses it means an altered financial and investment landscape with new opportunities and challenges in the years ahead. Keep in mind, however, that the information in this material is not intended as tax advice, and may not be used for the purpose of avoiding any federal tax penalties.

Business Takes Center Stage

Businesses may begin benefiting from a number of changes, including

Reduction in the top tax bracket from 35 percent to 21 percent;

Full and immediate expensing of capital investments (phased out after five years);

Implementation of a territorial tax system that taxes only income earned within the U.S.;

Special one-time tax on repatriation of foreign earnings;

Repeal of corporate Alternative Minimum Tax; and

A 20 percent deduction of qualified business income from certain pass-through entities. Service industries (e.g., health, law, professional services) are generally excluded, except where income is below $315,000 for joint filers and $157,500 for other filers.

Business owners should consider meeting with a tax professional to understand the impact of these changes on employee benefits, business investment, and corporate structure. Keep in mind the information in this material is not intended as tax advice, and may not be used for the purpose of avoiding any federal tax penalties.

Shifting Landscape

The changes in tax law may affect companies differently, which could shift where future investment opportunities may be found.

For instance, the lower tax rate may be more meaningful to higher-taxed industries, which can include certain retail, healthcare and telecom firms. Real estate investment trust companies also may benefit from the new pass-through deductions and exclusion from the new limit on interest deductibility of 30 percent of net income.

Conversely, with the changes made to individual taxation (see below), there may be a negative impact on home builders and realtors, while highly leveraged businesses potentially may burdened by the new cap on interest deductibility.

Overall, the tax cut is projected to increase corporate profits, with many Wall Street analysts lifting their 2018 earnings forecasts anywhere from seven to 10 percent.2 This may not only justify current stock valuations, but may influence prices going forward.

Past performance does not guarantee future results. The return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost.

Changes for Individuals

The Tax Policy Center projects that taxes will fall for all income groups and result in an increase of 2.2 percent in after-tax income. The Tax Policy Center also cautions, however, that some individuals and households may see a higher tax bill.3

Highlighted below are some of the major changes:

Reduction in most marginal income tax brackets;

Near doubling of the standard deduction;

Elimination of personal exemption;

A $10,000 cap on the state and local tax deduction;

An increase in the child tax credit and the expansion of eligible families;

Mortgage interest deductibility limited to mortgages up to $750,000 (reduced from $1 million);

Medical expenses deductibility will kick in at 7.5 percent of income, down from 10 percent;

529 plans may now be used to fund elementary and secondary education; 4

Alternative Minimum Tax is curtailed;

401(k) borrowers will have more time to repay plan loans when leaving an employer; 5,6 and

Elimination of the ability to “undo” a Roth conversion. 7

These tax changes may have wide ranging impact on the financial choices you make. For example, you may want to consider the best use for your additional after-tax income. Keep in mind the information in this material is not intended as tax advice, and may not be used for the purpose of avoiding any federal tax penalties.

Estate Taxes

The estate tax exemption was raised to $11.2 million, a doubling of the $5.6 million that previously existed. As such, individuals benefiting from this change may want to re-evaluate the strategies they have in place to address the tax and liquidity issues that may no longer exist.

Tax Cuts and Jobs Act

The nature and shape of the nation’s tax system inevitably influences the everyday decisions made by individuals and businesses alike. After the implementation of one of the most comprehensive reforms in over a generation, it is essential to review certain financial and investment strategies.

The tax implications of 529 College Savings Plans can vary significantly from state to state, and some plans may provide advantages and benefits exclusively for their residents. Please consult legal or tax professionals for specific information regarding your individual situation. Withdrawals from tax-advantaged education savings programs that are not used for education are subject to ordinary income taxes and may be subject to penalties.

Distributions from 401(k) plans and most other employer-sponsored retirement plans are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. Generally, once you reach age 70½, you must begin taking required minimum distributions.

A 401(k) loan not paid is deemed a distribution, subject to income taxes and a 10% tax penalty if the account owner is under 59½. Under the Tax Cuts and Jobs Act, if the account owner switches jobs or gets laid off, the 401(k) loan is eligible for a rollover within 60 days, essentially providing the person more time to repay the loan or manage the tax consequences of non-repayment.

To qualify for the tax-free and penalty-free withdrawal of earnings, Roth IRA distributions must meet a five-year holding requirement and occur after age 59½. Tax-free and penalty-free withdrawal also can be taken under certain other circumstances, such as a result of the owner’s death. The original Roth IRA owner is not required to take minimum annual withdrawals. The Tax Cuts and Jobs Act repeals the rules permitting the recharacterization of Roth conversions, effective starting in 2018

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2019 FMG Suite.

Market Summary

Stephen Eldridge has more than 44 years of direct industry experience, having founded Stephen Eldridge & Company, a retirement plan administration firm, in 1972. Early in his career, following the passage of the Employee Retirement...

Craig Garner, a 26-year veteran of the firm, provides education and assistance in a number of areas, including plan document review, ERISA guidance and ongoing compliance education. Craig also conducts operational plan reviews that...

With over 20 years of experience working in asset management and employer sponsored retirement plans, Sean Riley brings an insider’s perspective to his role as a consultant and advisor for our clients. Sean joined the firm in...

Kevin Whitmore brings almost three decades of securities industry experience to his role as a financial advisor. After earning a B.A. in business and economics from St. Anselm College, Kevin began his career in the securities business...

Robert Batdorf is a senior client portfolio manager and 24-year veteran of Eldridge Investment Advisors, Inc. He brings more than 4 decades of industry leadership and experience across multiple market and economic cycles to the...

Warren joined the firm in 1989 as a Portfolio Manager and financial advisor, concentrating in mid-to-large company retirement plans and 529 education savings plans. Beginning in 2016, he will focus solely on client portfolio management...

Susan Lipsett is a research assistant and administrative assistant supporting the firms’ client portfolio managers as well as financial advisors Sean Riley and Kevin Whitmore. She collects and distributes...

Leslie Maffee oversees the daily operations of the branch office and is a LPL Registered Sales Assistant to Stephen Eldridge and Eric Putney. She has more than 30 years of experience in branch office operations (over 20 years with...

Meg Dworkin provides support for the registered assistants in addition to being a member of the retirement plan team. She has 20+ years of experience in the areas of defined contribution, defined benefit and individual taxation. Meg...

With over 16 years of experience in the investment industry, Stephen Murray provides research analysis and portfolio management. Prior to joining the firm in 2016, he was Director of Research and Portfolio Manager with Harvest Capital...

Justin Eldridge joined the firm in 2016 to assist in the areas of Sales and Research. He graduated from Trinity College with a double major in Economics and Political Science, and earned his MBA in Finance from Northeastern University....

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The content is developed from sources believed to be providing accurate information.
The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals
for specific information regarding your individual situation. Some of this material was developed and produced by
FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named
representative, broker - dealer, state - or SEC - registered investment advisory firm. The opinions expressed and
material provided are for general information, and should not be considered a solicitation for the purchase or
sale of any security.

Copyright 2019 FMG Suite.

Securities offered through LPL Financial, Member FINRA/SIPC. Advisory services under the SAM program offered through Eldridge Investment Advisors, Inc. ("EIA"), a registered investment advisor, and through LPL Financial, a registered investment advisor. Advisory services under other advisory programs are offered through LPL Financial, a registered investment advisor. See relevant program disclosure documents for additional information. EIA and Stephen Eldridge & company are separate entities from LPL.

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